Brian Lenihan, the Irish finance minister, was 75 minutes late for his own bailout talks with other finance ministers in Brussels last week. Apparently, his car was stuck in traffic. However good the excuse, it struck everyone as a profoundly symbolic moment – proof of the incompetence of the Irish government. If you want to negotiate a huge line of credit from countries whose tax base you are undermining by tempting their companies with a corporation tax at half the going rate, it pays to arrive on time.

The anger within Ireland at the duplicity and lack of grip of its government is boiling over. Brian Condra, a hospital porter in Dublin, told the BBC he could not understand why taoiseach Brian Cowen has been denying that the IMF and EU would have to bail out Ireland when everybody else in the country could see it was inevitable.

He trusted nobody in authority. What began as a second leg of the Irish banking crisis – with a run on stricken Irish banks by the professionals handling big company and big investor savings – is now a crisis of the Irish state. As an IMF team landed in Dublin to join EU officials to work on the terms of a jumbo loan, historians, intellectuals, headline-writers and opposition politicians combined with ordinary Irish citizens to characterise last week as the darkest in the republic's history.

But in Britain the vast inflation of Ireland's public sector wage bill, the fecklessness of its bankers who allowed lending to balloon to four times Irish GDP, largely on the expectation of never-ending property price increases, and the grubby corruption of its political elite are all pushed to one side. Voices on right and left insist that what is happening in Ireland is the fault of the EU and the euro. If Irish interest rates could have been a fraction higher, they argue, like those in Britain, Ireland would not have had a property and credit boom.

Now, those voices intone, Berlin, Brussels and Paris are bringing the plucky republic to its knees. What it must do, they say, is leave the euro immediately and join Britain, with its sturdy monetary independence, so that it can devalue, print however many punts it needs to get its economy going and enjoy complete economic sovereignty. Then the world of budget cuts and vast bailouts would disappear at a stroke.

The capacity to look at a problem through the wrong lens and then advocate what are, in effect, go-it-alone, beggar-my-neighbour economic policies in the name of free markets and political sovereignty is breathtaking. Dublin followed Edinburgh, Reykjavik and Dubai in trying to exploit unregulated global finance and become an international financial centre. The exercise blew up in everyone's face; floating rates hardly saved Iceland. The euro is not the cause of Ireland's problems or the wider fiasco. It could be part of the solution.

Nobody pretends the euro is perfect. It was probably too ambitious to incorporate weak members with the strong so soon. Reform is necessary. Equally, the strains in crisis-hit Ireland and Greece may eventually become impossible to manage. The fiction is to imagine that the soft option is to abandon it.

Europe's monetary arrangements have been problematic since the breakdown of the gold standard. The issue is how Europe is to live with the German economy and its dynamic export sector. Europe can have floating exchange rates in which the deutschmark becomes Europe's principal currency – the position between the early 1970s and mid 1980s. Any country, including Britain, then has to shadow German economic policies or get punished by the markets. Or you can have an unstable system of fixed but flexible exchange rates – the old exchange rate mechanism – in which again Germany is the economic sun around which the rest of Europe orbits.

Or you can have a single European currency with more constraints, but at least there is pan-European stability. The idea that floating rates are nirvana while monetary union is economic sado-masochism just does not reflect the lessons of history or the complexities of the trade-offs involved, although nobody wants to engage in a rational discussion. There is also the awkward fact that the euro area is set to grow much faster than Britain next year. Much more fun to have a witch-hunt for anyone who was ever pro-euro or pro-European.

In the aftermath of a credit crunch, with banks across the world still woefully undercapitalised, still paying fortunes in bonuses and still not accepting the full write-offs on their pre-2008 lending, this is especially worrying. Dominique Strauss-Kahn, managing director of the IMF, told Stern magazine that he thinks a second financial crisis is almost inevitable given the paucity of reform and the vulnerability of the financial system – and that next time round it will be impossible to persuade taxpayers to fund bailouts. It would be a crisis of democracy. He castigates the many bankers whose reaction to proposed reform, to reductions in their pay or to make their banks more financially healthy is to threaten to move offshore.

A second financial crisis would confront Britain with Irish-style dilemmas despite the independence of the pound. We have proportionally more bank lending in relation to our GDP than even the Irish, some £7 trillion or five times GDP.

Historically, financial crises in periphery countries eventually strike the centre. If the same financial professionals who caused the Irish bank run decide that British banks are too exposed to Ireland, that the British property market is about to buckle and that, like the Irish, British bankers are hiding the ongoing weakness in their balance sheets and they start a British bank run, then disaster will hit. Britain, too, will need a jumbo loan – in dollars and in much deplored euros.

As Strauss-Kahn makes clear, in finance it all connects – from how exchange rates are organised to the rules governing banking. He sees the euro as key to the future, part of a managed world financial order in which a few great currency areas, including the dollar, yen and yuan, would pre-agree to make the system work by not running up excessive deficits or surpluses. At the same time, banks will have to operate with a great deal more capital and much more transparently.

This would make the world financially safe. The trouble is that in every country there are powerful self-interests arguing that no such disciplines are necessary because they infringe the principles of free markets and political sovereignty – and drawing precisely the wrong conclusions from Ireland's dramas. They oppose both monetary and financial reform to the last. Strauss-Kahn is worried that this makes another global financial crisis much more likely. If he is worried, we should be too.